Matern Law - From A Client's Perspective: 2009

Friday, December 18, 2009

Worker's Compensation Insurance for Condominium Associations - Is it Necessary?

Do condominium associations need Worker's Compensation? For a large high rise with 24 hour security, building engineers and janitors the answer is obviously yes, since all these people are full time employees of the association. For smaller condominium associations the answer is less obvious.

Recently the board treasurer of a 16 unit condominium association asked me about whether his condominium association should have Worker's Compensation Insurance.

With only sixteen units, I asked whether they had any employees on their payroll. He said no. They do have a women who cleans the hallways twice a month. They also have a person who plows snow off the driveways. And they have a scavenger service that picks up the trash. Occasionally, they hire contractors to do work on the air-conditioning, paint, and do other repairs to the building.

Since they have no employees on their payroll, my question was why would you think that you need Worker's Compensation insurance. His answer was that his insurance broker suggested it. The insurance broker explained that since some of the contractors that they hire might not have Worker's Compensation insurance for their employees. Even if this was true, I questioned why Worker's Compensation insurance would be necessary since the condo association has general liability insurance coverage and general liability insurance covers suits by people injured on the property.

One of the arguments that insurance brokers and insurance companies make is what if the person files a Worker's Compensation claim. But unless their real employer has Worker's Compensation coverage, that person (and their lawyer) would probably prefer to file a traditional personal injury suit in the county court. By doing so, they would have the chance to get a much bigger verdict since they could make a claim for pain and suffering (usually several times the amount of their medical bills). Worker's Compensation claims are resolved under a different system and claims for pain and suffering damages are not allowed. Arguably, it would be malpractice for a personal injury lawyer not to file a lawsuit in the county court system where they could get their injured client more money.

The fundamental question is could the employees of the businesses that the associations contracts to perform services be considered employees of the association? The IRS has a number of criteria they consider in determining whether a person is an independent contractor or an employee http://www.irs.gov/businesses/small/article/0,,id=99921,00.html. The Illinois Supreme Court has considered this question too. The Illinois Supreme Court looked at whether the person's services relate to the business purpose of the company. In the Illinois Supreme Court case the company was in the trucking business and the person was an owner/operator of a truck. The court found that the owner/operator was an employee because the trucking company's business purpose was trucking and truck drivers were obviously necessary. In this situation, the business' purpose is a condo association. They are not running a cleaning service company. Similarly, the association is not in the business of snow removal, painting or roof repair.

Applying the IRS criteria, the cleaning lady should be considered an independent contractor. The cleaning lady can decide on what day of the week to come. She can decide what time to start (morning or afternoon). She can hire an assistant to help her. She can send a substitute. She receives a flat fee for the services. The few hours per month she cleans the association's hallways is not her only source of income. She cleans on the other days at many other places. All of these suggest that the IRS would agree that the cleaning lady is an independent contractor.

The snow plow company's relationship is similar. So, it too would be an independent contractor and not an employee.

Then why would the insurance broker and the insurance company think this association needs a Worker's Compensation policy.

There could be many reasons why an insurance broker would recommend that a condominium association with no employees purchase a Worker's Compensation policy. One reason is that the broker wants the client, the association, to be protected to the maximum extent possible. Another reason is that the broker wants to protect itself from a possible claim by the association against the broker for not recommending all the possible types of coverage. One could be cynical and say "follow the money." The insurance broker receives another commission. The insurance broker is going to sell the general liability policy anyway so selling the association a Worker's Compensation policy is an additional policy and an additional commission.

Following the money, the insurance company would rather place a claim under a worker's compensation policy than under a general liability policy because they are likely to pay less. Worker's Compensation claims are handled initially by the Industrial Commission, they are usually resolved more quickly and under Worker's Compensation law the claimant is not entitled to damages for pain and suffering (a significant part of the damages in a traditional lawsuit). So, insurance companies have an incentive to be able to handle a claim under a Worker's Compensation policy.

Whether a condominium association needs a Worker's Compensation policy depends upon the association's specific circumstances. But for many small buildings it may not be necessary.

Disclaimer

This is a passive blog and the materials contained herein are provided for informational purposes only. Nothing contained in this blog should be interpreted as a solicitation of business and none of the information contained herein constitutes legal advice. The law is subject to change without notice, and the local laws of your residence may be different from the general information displayed on this blog. You should not rely on the information provided on this blog without first consulting an attorney. Contacting this website does not establish and attorney/client relationship between you and its publisher Christopher W. Matern.

An attorney/client relationship can only be established with Christopher Matern by engaging in direct person-to-person contact with Christopher Matern. Christopher Matern does not intend to practice law in any jurisdiction in which he is not licensed.

Monday, December 7, 2009

Secretary of State Warns of Scam on Corporations

The Illinois Secretary of State posted the following warning of a scam to charge a fee for filing corporate minutes. As the Secretary of State warns corporations are not required to file their corporate minutes.

WARNING! A non-governmental firm called "Illinois Corporate Compliance" or "Annual Corporate Compliance" is contacting Illinois businesses in an attempt to collect a $150 fee to file corporate meeting minutes. Please be aware that corporations are NOT required by law to file minutes with ANY government or private entity. It is recommended that corporations do NOT reply to the solicitation.

If you have questions about whether it is necessary to file a particular document you should contact your attorney.

Disclaimer

This is a passive blog and the materials contained herein are provided for informational purposes only. Nothing contained in this blog should be interpreted as a solicitation of business and none of the information contained herein constitutes legal advice. The law is subject to change without notice, and the local laws of your residence may be different from the general information displayed on this blog. You should not rely on the information provided on this blog without first consulting an attorney. Contacting this website does not establish and attorney/client relationship between you and its publisher Christopher W. Matern.

An attorney/client relationship can only be established with Christopher Matern by engaging in direct person-to-person contact with Christopher Matern. Christopher Matern does not intend to practice law in any jurisdiction in which he is not licensed.

Sunday, November 22, 2009

Will Essentials

A Will is a very important document. You should review it periodically to make sure that it expresses your intentions. Along with the provisions that deal with to whom you are leaving your property, there are several other provisions that are equally important to make sure that your Will functions that way you intend. Here are a few provisions that should be part of your Will:

Waiver of bond for the executor
At least one successor executor (in case the first named executor can't serve)
Trust provisions if you have minor beneficiaries
Comprehensive powers for the executor and/or incorporation of statutory powers
Contingent beneficiaries (in case the primary beneficiaries are deceased)
Self-proving affidavit (witnessed and notarized)

If you have a Will you should check it to make sure that these provisions are included.

Disclaimer

This is a passive blog and the materials contained herein are provided for informational purposes only. Nothing contained in this blog should be interpreted as a solicitation of business and none of the information contained herein constitutes legal advice. The law is subject to change without notice, and the local laws of your residence may be different from the general information displayed on this blog. You should not rely on the information provided on this blog without first consulting an attorney. Contacting this website does not establish and attorney/client relationship between you and its publisher Christopher W. Matern.

An attorney/client relationship can only be established with Christopher Matern by engaging in direct person-to-person contact with Christopher Matern. Christopher Matern does not intend to practice law in any jurisdiction in which he is not licensed.

Sunday, October 25, 2009

Estate Planning Not Just for the Wealthy

Estate Planning is not just for the wealthy. Estate Planning also is important for people with modest means too.

A recent article in the Chicago Tribune titled Estate planning saves headaches for heirs discussed reasons that estate planning is important for people with modest means.

The article highlights some of the challenges people are now facing such as providing for children from a prior marriage. It also gives a good explanation of the differences between a Will and a Revocable Trust (also known as a Living Trust).

Disclaimer

This is a passive blog and the materials contained herein are provided for informational purposes only. Nothing contained in this blog should be interpreted as a solicitation of business and none of the information contained herein constitutes legal advice. The law is subject to change without notice, and the local laws of your residence may be different from the general information displayed on this blog. You should not rely on the information provided on this blog without first consulting an attorney. Contacting this website does not establish and attorney/client relationship between you and its publisher Christopher W. Matern.

An attorney/client relationship can only be established with Christopher Matern by engaging in direct person-to-person contact with Christopher Matern. Christopher Matern does not intend to practice law in any jurisdiction in which he is not licensed.

Tuesday, August 25, 2009

Providing for Parents in Your Will

This linked article provides two good examples of why it can be appropriate to include your parents and or grandparents as beneficiaries of your Will or Revocable Trust.

If you currently are supporting either your parents or grandparents or even if you anticipate needing to provide some support for them in future, it would make sense to include a provision in your estate plan to provide for their support.

This should not be very difficult or expensive.

Friday, July 10, 2009

Illinois Estate Tax

New Illinois estate tax legislation may provide a way to defer Illinois estate tax. Currently there is $1.5 million difference between the Illinois and Federal estate tax credits. This could result in some estates for Illinois residents having to pay Illinois estate tax even though they were exempt from Federal estate tax.

For 2009 the Federal estate tax credit is $3.5 million. However, the Illinois estate tax credit is only $2 million. An Illinois resident with a $3.5 million estate would owe $0 of Federal estate tax, but would owe Illinois estate tax of $209,124.

The proposed legislation would permit a husband and wife to defer that $209,124 until the second spouse passed away. For this to work the couple would have needed to include a specific provision in their estate plan. This specific provision is called a qualified terminable-interest property trust. This type of trust is commonly known by its acronym as a QTIP trust.

If a husband and wife residing in Illinois have a combined estate over $2 million, a review of their estate plan might be worthwhile.

Thursday, June 4, 2009

Good Estate Planning – Not Just a Will and a Trust

A good estate plan includes not only a Will and possibly a Living Trust, but also includes a review of beneficiary designations.

It seems obvious that a Will transfers property in your estate. But what may not be so obvious is that if you have beneficiaries named for bank accounts, brokerage accounts, life insurance policies those would not be part of your estate. Your will would have no effect on how they are distributed. The assets in those accounts will pass directly to the named beneficiaries. This is also true for real estate owned in joint tenancy. It too is not part your estate. While this may work exactly as you intend but then it may not.

For example, a person early in their life may name their parents as beneficiaries. This is fine at the time since the person might want to provide for the future care of their parents. But in later years they marry and have children and, if they thought about it, they would want to change the beneficiary designations.

So, beneficiary designations and joint tenancy accounts and real estate in joint tenancy should be considered in evaluating your estate plan.

This is even more important with respect to IRA and 401(k) accounts. Because these types of accounts have special rules involving withdrawals, extra consideration should be given to the beneficiary designations.

Thursday, May 7, 2009

US Targets Smaller Businesses for Hiring Illegal Aliens

The Department of Homeland Security announced last week that it is going to be targeting businesses that employee illegal aliens for prosecution. In a fact sheet, the Deparment of Homeland Security indicated that it will target smaller businesses for prosecution. Previously, the Homeland Security targeted business with at least 150 illegal employees. Now Homeland Security is targeting business with at least 25 illegal employees for prosecution.

Employers who might have illegal alien employees might want to review their personnel files to make sure that they have current I-9 forms or have used some of the new verification tools such as E-Verify.

Thursday, April 30, 2009

Condo Insurance Requirements

If you live in a condominium or manage a condominum Illinois law specifies minimum amounts of insurance the condominium association must carry.

As you probably know, in Illinois, most aspects concerning a condominium are governed by statute in 765 ILCS 605, commonly known as the Illinois Condominium Property Act(the “Act”). Specifically, Section 12 of the Act discusses the insurance requirements for a condominium. As a condominium you are required to maintain property insurance, general liability insurance, a fidelity bond (if you have more six or more units), and directors and officer’s coverage.

Section 12(a)(1) discusses the requirements for property insurance. The property insurance must cover the common elements, the units, and limited common elements. The individual units should be covered to the extent of the bare walls, floors, and ceilings. It is the individual unit owner’s responsibility to purchase insurance for the personal contents of the unit. You must provide coverage for special form causes of loss and increased costs of construction due to building code requirements at the time the insurance is purchased and at each renewal date. Lastly, the total amount of the coverage can be no less than the full insurable replacement cost of the insured property less the deductibles.

Section 12(b)(2) covers the general liability requirement. You must have coverage for claims and liabilities arising in connection with the ownership, existence, use, or management of the property. The amount of the policy has to be a minimum of $1,000,000, however, given the size of your condominium you may want to discuss a larger coverage amount with your insurance agent. You must include as additional insureds: the board, the association, the manager and their respective agents and employees, and the unit owners to the extent of claims arising out of their use of the common elements.

Section 12(3)(A-C) discusses the fidelity bond. All condominiums with six or more units are required to obtain one. The bond must cover both the management company and the individual manager, their employees or agents who have access or control over association funds. The amount of the bond for both the company and individuals must be in the full amount of the association funds and reserves that are in the custody of the association or management company.

Section 12(3)(D) covers the director’s and officer’s liability coverage. This needs to cover all contracts or actions taken by the board in their official capacity as directors and officers, excluding actions for which directors or officers are not entitled to indemnification by law. You may decide the amount of coverage to carry if it is not already established in the declaration or bylaws.

These are the minimium amounts required by Illinois law. Like the mininium required amounts of automobile coverage, your situation might warrant having more coverage than the legally required minimum amount.

It might be a good idea to check with your insurance agent to determine whether you have the proper coverage.

Tuesday, April 21, 2009

Secretary of State Jesse White on Online Filing Fees

In a January 23^rd post , I wrote about Illinois Secretary of State premium/penalty for filing annual reports online. The premium that Secretary of State charges for filing online is 50% above the normal filing cost. Since then I had the opportunity to speak with Illinois Secretary of State Jessie White personally.

I gave Secretary White my reasons opposing his online filing fee premium. I told him in an era of heightened environmental consciousness, his policy was anti-green. It not only wasted paper, but required more fuel usage for mail delivery. I also said that discouraging filing online meant more staff intensive handling of paper files.

Secretary White gave me the “Springfield Smile.” The “Springfield Smile” is a look a politician gives you before he is going to pass the blame to someone else. Secretary White followed his “Springfield Smile” with the response that his fees were set by the legislature. So, it was “out of his control.” Secretary White’s response was disingenuous. While it is technically true that the state legislature approves his fees, they act on his recommendation.

Perhaps a call, letter or e-mail to your state representative and state senator asking for an explanation of why Secretary of State Jesse White should be discouraging online filing might be helpful.

You can find the name of your state representative and state senator along with their addresses by clicking on this link to the Illinois Board of Elections.

Wednesday, April 8, 2009

Directors & Officers' Duty to Creditors

In normal situations, a corporation's directors and officers owe a fiduciary duty to the corporation and its shareholders. But when a corporation becomes insolvent, that duty shifts to the corporation's creditors. In these challenging economic times, this duty by corporate directors and officers to the corporation's creditors could lead to lawsuits from creditors against the directors and officers personally.

If a corporation is insolvent, contemplating bankruptcy or has filed for bankruptcy protection a suit by its creditors is likely a useless effort. However, the corporation may have a directors and officers liability insurance policy and/or the at least some of the directors and officers may personally have money. So if creditors can sue the directors and officers personally the suit may be worthwhile.

For the duty to creditors to exist, the corporation must be insolvent. So when is a corporation insolvent? A corporation can be insolvent even before it has filed for bankruptcy protection or done an assignment for the benefit of creditors. A recent Illinois federal district court opinion stated that "A corporation is insolvent when its liabilities far exceed its assets, or when it is unable to pay its debts."

For creditors this may provide another path to repayment. For directors and officers of financially challenged corporations, it is one more of many risks to consider.

Disclaimer

This is a passive blog and the materials contained herein are provided for informational purposes only. Nothing contained in this blog should be interpreted as a solicitation of business and none of the information contained herein constitutes legal advice. The law is subject to change without notice, and the local laws of your residence may be different from the general information displayed on this blog. You should not rely on the information provided on this blog without first consulting an attorney. Contacting this website does not establish and attorney/client relationship between you and its publisher Christopher W. Matern.

An attorney/client relationship can only be established with Christopher Matern by engaging in direct person-to-person contact with Christopher Matern. Christopher Matern does not intend to practice law in any jurisdiction in which he is not licensed.

Wednesday, April 1, 2009

Avoiding Probate for Custodial Accounts

To save taxes and make gifts to children, grandchildren, nieces or nephews, many people have created custodial accounts. These accounts are commonly known by their initials UGTMA (Uniform Gifts to Minors Act) or UTMA (Uniform Transfers to Minors Act). They can be relatively low cost ways to make gifts to minors and good for tax planning.

But without good planning they can create problems in the future. The problems arise if you have not named a successor custodian. Without a successor custodian, upon your death or disability, a probate case would need to be filed before any money could be distributed.

Since these accounts are typically funded with relatively modest amounts, having to later file a probate case would be relatively costly.

Two ways to avoid this problem are:

1) name successor custodians for each of the accounts or

2) make a global designation of successor custodian for all custodial accounts in your Living (Revocable) Trust or Will.

This is another example were proper planning can avoid costly expenses.

Disclaimer

This is a passive blog and the materials contained herein are provided for informational purposes only. Nothing contained in this blog should be interpreted as a solicitation of business and none of the information contained herein constitutes legal advice. The law is subject to change without notice, and the local laws of your residence may be different from the general information displayed on this blog. You should not rely on the information provided on this blog without first consulting an attorney. Contacting this website does not establish and attorney/client relationship between you and its publisher Christopher W. Matern.

An attorney/client relationship can only be established with Christopher Matern by engaging in direct person-to-person contact with Christopher Matern. Christopher Matern does not intend to practice law in any jurisdiction in which he is not licensed.

Friday, March 20, 2009

Bring Your Thumb for the Next Real Estate Closing

On June 1st, people selling real estate in Illinois will not only have to have their signature notarized, but also they will have to add their thumb print. (Chicago Sun Times Article).

As a convenience some notaries would notarize a signature even though it was not signed in their presence. This practice has always been improper. Nonetheless, it probably was not rare.

Now with the thumbprint requirement, physical presence is required.

Wednesday, February 11, 2009

Free Estate Plan from the State of Illinois

The State of Illinois has provided a free Will for people who—for any number of reasons—have not prepared a Will.

Like many things that are free or low cost do-it-yourself, you may not be pleased with the results.

The State of Illinois “free” version that I have reproduced below is for a married couple with one or more children.

If you are not married or if you have a domestic partner the “free” Will that the State of Illinois provides for you may be even less satisfactory.

Here is Mr. Smith's "Free" Will from the State of Illinois

Last Will and Testament of John Smith

Drawn Up For Him by The State of Illinois Because He Died Without a Valid Will

I, John Smith, a resident of Illinois, do hereby accept this to be my Last Will and Testament drawn by the State of Illinois, because I do not otherwise have a valid will.

1.0 I give my wife one-half (1/2) of my assets, which I own in my own name, and I give my children the remaining one-half (1/2).

1.1 I appoint my wife as guardian of my children, but as a safeguard I require that she report to the Probate Court each year and render an accounting of how, why, and where she spent the money necessary for the proper care of my children.

1.2 As a further safeguard, I direct my wife to produce to the Probate Court a Performance Bond to guarantee that she exercises proper judgment in the handling, investing, and spending of the children’s money.

1.3 As a final safeguard, my children shall have the right to demand and receive a complete accounting from their mother of all her financial actions with their money as soon as they reach legal age.

1.4 When my children reach age eighteen (18) they shall have full rights to withdraw and spend their shares of my estate. No one shall have any right to question my children’s actions on how they decide to spend their respective shares.

2.0 Should my wife remarry and also die without a will, her second husband shall be entitled to one-half (1/2) of everything my wife owns in her own name.

2.1 Should my children need some of this share for their support, the second husband shall not be bound to spend any part of his share on my children’s behalf.

2.2 The second husband shall have sole right to decide who is to get his share, even to the exclusion of my children.

3.0 Should my wife predecease me or die while any of my children are minors, I do not wish to exercise my right to nominate the guardian of my children.

3.1 Rather than nominating a guardian of my preference, I direct my relatives and friends to get together and select a guardian by mutual agreement.

3.2 In the event that they fail to agree on a guardian, I direct the Probate Court to make the selection. If the court wishes, it may appoint a stranger acceptable to it.

4.0 Under existing tax law, there are certain legitimate avenues open to me to lower death taxes. Since I prefer to have my money used for governmental purposes rather than for the benefit of my wife and children, I direct that no effort be made to lower taxes.

IN WITNESS WHEREOF, I have set my hand and seal to this, my Last Will and Testament, consisting of two (2) typewritten pages, on this __________ day of ____________, 20__.

_________________________ (SEAL)

John Smith

Disclaimer

Tuesday, February 10, 2009

Proposed Bankruptcy Law May Reduce Foreclosures

An article in the Daily Herald (link to article) predicts that new bankruptcy legislation may be passed this month.

This new legislation would empower federal bankruptcy judges to modify residential mortgages including reducing the principal, the interest and the monthly payment.

Bankruptcy is an extreme solution that persons should never take lightly, but with this new legislation it might provide a way for people in financial trouble to keep their homes.

It could also help the real estate market recover. While real estate appraisers valuing neighboring homes might consider that a bankruptcy judge had reduced the loan principal, which is better for a neighborhood -- an occupied home home or a boarded-up bank owned house.

Tuesday, February 3, 2009

A Good Time for Estate Planning

In today's economic situation, estate planning maybe the last thing to consider. But with the stock and real estate markets depressed as well as historically low interest rates now may be a very good time to do some planning.

Below is a link to a Wall Street Journal article that discusses some of the many different ways that people can use the depressed markets and low interest rates for their benefit.

http://online.wsj.com/article/SB123249848140700515.html

Power of Attorney for Property Concerns

A Power of Attorney for Property is an important document to have in your estate plan. It is a very powerful tool that authorizes someone else to handle your financial affairs in the event that you cannot do so. However, like other types of powerful tools--it can be very dangerous if not used properly.

On Sunday February 1st, Eileen Ambrose wrote a good article in the Chicago Tribune cautioning people when they give a Power of Attorney over their property. Below is a link to the article.

http://www.chicagotribune.com/business/yourmoney/chi-ym-attorney-0201feb01,0,5256908.story

The article discusses the risks when someone gives a Power of Attorney for Property to a person who is not unscrupulously honest. It is best to name someone whose honesty is beyond question; someone who is strong enough to resist temptation.

This philosophy also should apply to persons named as sucessor holders of the Power of Attorney for Property.

The article's other good suggestion is to require that the Power of Attorney document include a requirement that the holder must provide copies of the account statements to another person you trust. The person would look at the account statements and raise an alarm if they suspected embezzlement.

A Power of Attorney for Property is very useful document, but it must be used carefully.

Disclaimer

Thursday, January 29, 2009

Government "Bad Bank" Plan May Slow Mortgage Relief

The federal government has been considering creating a new bank to buy all the high risk loans held by private banks. This new bank has been nicknamed the "bad bank" because it would hold only high risk loans.

The "bad bank" plan is the subject of an article by Greg Burns in today's Chicago Tribune (the link to the article is below).

In addition to the risks to taxpayers discussed in Greg Burns' article, there is another potential problem. That is banks that are currently negotiating with their borrowers on modify their loans may decide to wait to see if the Federal Government does in fact create a "bad bank" Waiting may not be could for borrowers who every day get further behind on their payments

http://www.chicagotribune.com/business/columnists/chi-thu-bad-bank-burns-jan29,0,5378928.column

Federal Goverment May Modify Mortgages

Federal Government Plan on Modifying Mortgages

The Federal Reserve is planning to modify mortgages where it holds the loans as collateral for Federal Reserve payments to the lender.

As Fox News reported (the link to the story is at the bottom of this post), homeowners will not know if the Federal Reserve is holding their loan as collateral. The homeowners will have to wait for the servicing company to contact the homeowner.

If you or a person you know is have problems paying their mortgage this is something to ask them about.

http://www.foxbusiness.com/story/markets/federal-reserve-modify-mortgages/

Monday, January 26, 2009

Second Marriages – A Critical Time for Estate Planning

Second Marriages – A Critical Time for Estate Planning

A second marriage when there are children from a first marriage can unintentionally disinherit those children.

A recent “cocktail party” question illustrates the unfortunate possibilities.

A 61 year old man recently dies leaving a wife and several adult children from a previous marriage. The man had no estate plan. Also, he and his second wife were in the process of divorce. But when he died, the divorce was not final so he was still legally married to his second wife.

With no estate plan, the man’s estate would go ½ to his wife that he had not yet divorced and ½ to his children.

If this man had been asked week before he died if it was his intention to leave ½ of his estate to the woman he was in the midst of divorcing how likely is it that he would have answered “No.” (The “bereaved widow” brought her boyfriend to his wake.)

The story could have been worse. The man could have put most of his assets into joint tenancy with his second wife after he married her. Then when he died his wife would have received all those assets. There would not have been a 50-50 split of those joint tenancy assets with his children.

Major life changes are good time to prepare or revise an estate plan. Second marriages are certainly one of them.

Disclaimer

Friday, January 23, 2009

Reasons Why You Need A Will

There are many reasons why you need a Will. A recent article in Forbes Magazine discusses many of them. You can read the Forbes article "Why You Need A Will at

http://www.forbes.com/2009/01/17/will-livingtrust-intestate-pf-in_ae_0119taxes_inl.html

Briefly, if you don't have a Will, the State will provide one, but the State law may not be what you want done.

Another excellent reason, which the article did not discuss, for parents of young children is to name guardians for the children.

Disclaimer

Jesse White’s Latest Money Grab

Illinois Secretary of State Jesse White has instituted a new policy that

Increases fees to businesses
Discourages efficiency in his office and
Wastes paper

Jesse White’s office has instituted an additional $50.00 fee for the convenience of filing annual reports online. This new fee is in addition to the existing $5.00 processing fee. So, the total fee for filing online is now $55.00.

This is 55% of the existing fees. That is pretty heavy “juice” for the convenience of online filing.

With businesses watching every penny to keep their doors open, now is not the time for a 50% increase in fees.

With a state government budget that is deeply in the red, now is not the time to encourage staff intensive procedures such as handling documents and payments by hand.

With a heightened concern for the environment including saving paper, now is not the time to discourage people from filing documents online.

If you think Jesse White’s new fees are not the kind of change for which you were hoping and voting, click on the e-mail link below.

In red, is a portion of Secretary of State Jesse White’s web site regarding the new fees.

Please Note: The pilot promotional program (with no expedited fee charges) for Web site filing of Certificates of Good Standing and Annual Reports expired November 30, 2008. Expedited processing fees will now be assessed on these transactions effective December 1, 2008. If you have any questions you may contact the Department of Business Services at 217-782-6961 or via email.

Below is a table of the annual report filing fees with the new online fee highlighted.

Annual Report Filings

Your Fee For This Transaction

Franchise Tax:	$25.00
Filing Fee:	$75.00
Penalty:	$0.00
Interest:	$0.00
Payment Processor Fee:	$5.00
Expedited Fee:	$50.00
Total Fee:	$155.00

Wednesday, January 21, 2009

Bankruptcy Reform Proposal from Senator Durbin

This is a press release from Senator Dick Durbin regarding his proposed bankruptcy reform legislation.

The text of Senator Durbin's bill can be found at http://thomas.loc.gov/cgi-bin/query/z?c111:S.61:

DURBIN DISCUSSES FORECLOSURE CRISIS, MORTGAGE BANKRUPTCY REFORM WITH HOUSING SECRETARY NOMINEE

Wednesday, January 14, 2009

[WASHINGTON, D.C.] – U.S. Senator Dick Durbin (D-IL) met with Shaun Donovan, President-elect Barack Obama’s nominee to head the Department of Housing and Urban Development (HUD), today, where he discussed the foreclosure crisis with the nominee and confirmed Donovan’s support of Durbin’s Helping Families Save Their Homes in Bankruptcy Act, a bill that will allow homeowners at risk of foreclosure to alter the terms of their mortgages in bankruptcy.

“Shaun Donovan will be an excellent HUD Secretary and will play a central role in the resolution of the current housing crisis,” Durbin said. “Under his leadership, HUD can help stem the tide of foreclosures and move the housing market, and the broader economy, back on track. I look forward to working closely with him to help those at risk of foreclosures keep their homes.”

Durbin urged Donovan to see that the bankruptcy measure would be part of the upcoming economic recovery package. Donovan agreed that judicial modifications of troubled mortgages are appropriate and pledged to work towards its quick passage.

Earlier this month, Durbin reintroduced legislation that would change the outdated bankruptcy code to allow at-risk homeowners to alter the terms of their mortgages in bankruptcy. He first introduced this bill in the fall of 2007, when experts estimated that nearly 2 million homeowners were at risk of losing their homes to foreclosure. Over the last fourteen months, that number has quadrupled. Today nearly 8.1 million homeowners - 16 percent of all homeowners - are at risk of foreclosure.

Last week, Citigroup, one of the nation’s largest mortgage lenders, announced its support of the legislation, splitting the industry that had once opposed the bill.

President-Elect Obama announced his plans to nominate Mr. Donovan on December 13th. Donovan, the current head of New York City’s Department of Housing Preservation and Development, will play a major role in reversing the current housing and economic crisis in the Obama Administration.

At his confirmation hearing yesterday before the Senate Banking Committee, Donovan said, “Clearly the most important public policy decision facing Congress and the new Administration is how to best ease the economic pain that millions of American families are feeling right now because of our unsteady housing markets. Housing is at the root of the market crisis we are now experiencing, and HUD must be part of the solution.”

Monday, January 19, 2009

Bankruptcy - A Consumer's Overview

A Consumer's Overview of Bankruptcy

Why is there Bankruptcy protection?

The bankruptcy code is designed to protect you and help you regain your life after financial disaster.

Bankruptcy is NOT failure.

It is a tool for success and getting back on track.

Bankruptcy is NOT irresponsibility.

The vast majority of bankruptcy cases do not involve people who were simply frivolous with their finances.
Most common causes of bankruptcy are: job loss, divorce, high medical bills from injury or serious illness, death of a supporting family member, poor economic conditions.

Bankruptcy does NOT simply protect debtors.

While the Bankruptcy code does help debtors get rid of debt, it also protects creditors to make sure all creditors are treated fairly.

If you have a customer who owes you money and is filing for bankruptcy, the Bankruptcy code can help you get the most money you can toward what you are owed.

Bankruptcy does NOT leave you destitute.

Most people who file for bankruptcy can keep their house, car, and other personal belongings. The Bankruptcy code is designed to leave you with the tools necessary to begin a new financial life.

Types of Bankruptcy

For individuals there are two ways of filing for bankruptcy:

Chapter 7 “Liquidation” Bankruptcy

Chapter 13 “Debt Reorganization” Bankruptcy

“Chapter 7” Liquidation Bankruptcy

Liquidation Bankruptcy is governed by Chapter 7 of the Bankruptcy Code.

v In a Chapter 7, all of your non exempt assets are “turned over” to the Bankruptcy trustee and are sold and distributed to the creditors. With a couple exceptions, any new assets acquired after the bankruptcy petition is filed belong to the debtor and are out of the reach of pre-bankruptcy creditors. This gives the debtor their “fresh start.”

What Chapter 7 Does and Does Not Do.

Chapter 7 DOES:

Discharge almost all of a debtor’s debt:

ü Credit card bills

ü Hospital bills

ü Certain taxes

ü Department store bills

ü Bills for personal services

Reduce the amount of secured debt to the market value of the secured debt

For example, if you have $300,000 left on a home mortgage, but the market value of the home is only $250,000, the amount due on the mortgage gets “stripped down” to $250,000. The $50,000 deficiency is discharged. However, the bank can still foreclose when the case is discharged.

Chapter 7 DOES NOT:

v Discharge debts secured by a lien or a mortgage:

ü Mortgage on property

ü Purchase money lien on a vehicle

ü Judgment liens

ü Tax liens

v Discharge certain “priority” debts

ü Child support

ü Alimony

ü Damages owed on a drunk driving case

ü Income taxes assessed within 3 years of filing

ü Condo assessments

“Chapter 13” Debt Reorganization Bankruptcy

Unlike a Chapter 7, a Chapter 13 reorganizes the debt. This means the debtor keeps all their property and does not turn any over for liquidation. Most debtors who file Chapter 13 are attempting to stop a foreclosure and/or catch up on a mortgage. In Chapter 13 you enter into a payment plan generally for 5 years where you pay off your secured debt and a fraction of your unsecured debt. Debtors MUST have a steady stream of income to file for Chapter 13. If there is no steady stream of income, a Chapter 13 plan cannot be confirmed.

Chapter 13 DOES:

v Give the debtor time to pay off non-dischargeable items secured by:

ü Mortgages

ü Tax liens

ü Judgment liens

v Allow a debtor to catch up on past due mortgage payments

v Allow the debtor to pay off only a portion of most debt with the remainder discharged

o For most debts usually ten cents on the dollar

v Force all creditors to accept the payment plan approved by the Bankruptcy judge

Chapter 13 DOES NOT:

· Reduce the amount due on a home mortgage or car loan to the market value of the property

o If you have $300,000 left on a home mortgage but the market value of the property is $250,000, you will still owe the $300,000 and do not get the “strip down” offered in Chapter 7

· Get approved unless ALL of the debtor’s disposable income goes to the payment plan for the entire 5 year period.

The Automatic Stay

Regardless of which way you file bankruptcy, you will have the protection of the automatic stay. The automatic stay becomes effective immediately upon the filing of a bankruptcy petition.

What is the automatic stay?

The automatic stay is like an impenetrable steel door slamming down between the debtor and all the creditors. Once the automatic stay is in effect, ALL creditors (including governmental creditors like the IRS) must immediately stop ALL actions to collect debts from the debtor. The automatic stay generally remains in effect until the case is discharged.
While the automatic stay is in effect:

Ø     Creditors are not allowed to call the debtor or send letters;

Ø     Any foreclosure actions and collection lawsuits are halted;

Ø     Creditors cannot repossess property AND sometimes must GIVE BACK property recently repossessed:

Ø     Utilities, including cable and internet service providers must continue service to the debtor

Ø     Creditors who violate the automatic stay can be fined, lose their priority or even be imprisoned by the Bankruptcy court!!

BE WARNED: Sometimes creditors can argue that they are not receiving “adequate protection” under the bankruptcy case and will ask the court to lift the automatic stay for their claim. Courts will sometimes do this if a debtor missed scheduled payments during the bankruptcy case or the debtor has no equity in the property. However, generally the automatic stay will remain in effect until the discharge of the case.

Which Chapter DO I choose?

Why would people choose to enter into a five year payment plan under Chapter 13 rather than file a Chapter 7 immediate discharge of the debt??

Ø     Most people who file for Chapter 13 are trying to save their home from a foreclosure. In Chapter 13, you can catch up on mortgage payments and get the mortgage reinstated.

o      In Chapter 7, if you cannot come up with all the past due mortgage payments by the time of discharge (generally 60-90 days after filing), the lender will often continue with the foreclosure when the case is over.

Ø     Some debts, like recent income taxes, are not dischargeable. Entering Chapter 13 lets you pays those taxes over the 5 year plan, AND, the IRS only gets the interest rate allowed by the Bankruptcy Code, not the IRS preferred penalty rates.

Which Chapter CAN I choose?

The Bankruptcy Code now limits who may file for Chapter 7 and who must file for Chapter 13 based on the debtor’s income and the number of dependents in their household:

·       If your income is below a certain median income set by the Bankruptcy code, you may automatically file for Chapter 7.

For example in Illinois the median income levels are

STATE

1 earner

2 people

3 People

4 People

Illinois

$45,606.00

$57,829.00

$66,189.00

$78,182.00

·       If your income is above the median, then you must go through the Bankruptcy Code’s “Means Test”. If you are above the Means Test limit, you may not file for Chapter 7 and may only file for Chapter 13.

Can I do both?

The so called “Chapter 20”
- Some people will enter a Chapter 7 bankruptcy to discharge all the unsecured debt, and then immediately file a Chapter 13 bankruptcy to get a payment plan for paying off all the non-dischargeable debt.
- Under current bankruptcy law, generally this is harder to do because the law sets a minimum amount of time between filing a Chapter 7 and then a Chapter 13.
- However, some courts will allow a debtor to file a Chapter 13 while a Chapter 7 is pending, but this is a rare circumstance.
Disclaimer

This is a passive blog and the materials contained herein are provided for informational purposes only. Nothing contained in this blog should be interpreted as a solicitation of business and none of the information contained herein constitutes legal advice. The law is subject to change without notice, and the local laws of your residence may be different from the general information displayed on this blog. You should not rely on the information provided on this blog without first consulting an attorney. Contacting this website does not establish and attorney/client relationship between you and its publisherChristopher W. Matern.
An attorney/client relationship can only be established with Christopher Matern by engaging in direct person-to-person contact with Christopher Matern. ChristopherMatern does not intend to practice law in any jurisdiction in which he is not licensed.

STATE	1 earner	2 people	3 People	4 People
Illinois	$45,606.00	$57,829.00	$66,189.00	$78,182.00

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